COLUMN-Commodity index interest rises in Q3: John Kemp

-- John Kemp is a Reuters columnist. The views expressed are his own --

By John Kemp

LONDON, Nov 5 (Reuters) - Investor interest in commodity indices increased substantially between July and September, with significant fresh inflows, but new money is being allocated in a more sophisticated way in a bid to minimise the cost of being long in markets with a contango structure. [ID:nLK421501]

Funds invested in commodity indices amounted to $134.5 billion at the end of September, up 14.8 percent from $117.2 billion at the end of June, according to new data from the Commodity Futures Trading Commission (CFTC).

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While the value of investments remains well below the peak at the end of Q2 2008 ($202 billion) it has risen almost two-thirds since the Q4 2008 low ($82 billion).

Between Q4 2008 and Q2 2009, the rise was largely driven by an appreciation in prices.

But most of the Q3 increase appears to have come from an inflow of new funds rather than a revaluation of positions already held. While index investments rose 14.8 percent between June and September, the weighted-average price of the commodity futures in the Goldman Sachs Commodity Index .SPGSCI was up less than 3 percent.